The ASEAN Economic Community will be implemented on December 31, 2015

with an underlying agenda of economic integration of ASEAN countries to

eliminate or minimize the obstacles in economic activity across the region, in
trade, goods and services, and investment.
The main purpose of the establishment of the AEC is to create:
1. ASEAN as a single market and international production base with elements
of a freer flow of goods, services, investment, educated labor and freer
capital flows.
EXAMPLE: People/corporations in ASEAN are free to bring capital to own or
establish a new company within the ASEAN countries.
2. ASEAN as a region with a high level of economic competitiveness including
competition rules in the areas of consumer protection and intellectual
property rights, components of infrastructure development, taxation, and
e-commerce.
EXAMPLE: The idea is to support the infrastructure with new modern air or
sea ports, toll roads and highways, IT & communication infrastructures,
etc. There will be clear regulations on tax (tax relief) and an
encouragement to develop more e-commerce business, e-procurement for
government needs, and on line trade.
3. ASEAN as a region with equitable economic development for small and
medium enterprises, and the initiative for ASEAN integration CMLV
countries (Cambodia, Myanmar, Laos, and Vietnam)
EXAMPLE: CMLV countries will be new members of the ASEAN. Currently,
the economic powers of these CMLV countries are lower among the
participants.
4. ASEAN as a region fully integrated into the global economy with elements
of an organized and integrated approach in economic relations outside the
region, and increased participation in global production networks
The AEC creates greater economic opportunities for Indonesia, specifically
with the marketing of goods and services from Indonesia by expanding its
reach to other ASEAN countries. Currently, market share in Indonesia is
represented by 250 million people. In the AEC, the ASEAN market share of
some 625 million people could be targeted by Indonesia providing the country
with a greater opportunity to tap into a wider market.
Under the AEC, exports and imports will be processed cheaper with an
additional benefit tied to labor from other countries in ASEAN, as these
countries will be free to work in Indonesia and in contrast, Indonesian workers
(TKI) will be free to work in other countries in the ASEAN.
The new government, under President Joko Widodo, has opened the door for
foreign investors to invest mainly in infrastructure up to 5 years.
Infrastructure development is a top priority of the current administration
specifically in the areas of the construction of highways, ports, railways,
irrigation and power generation.

As noted in the Presidents speech on August 14, 2015, the government

allocated toward an infrastructure development budget IDR 313.5 trillion for
2016; significantly higher than the budget allocation for infrastructure in the

2015 budget. In addition to the obvious opportunities, there are also barriers
that Indonesia faces in entering the AEC, including:

1. Quality of education remains low for labor, where until February 2014;
there were 76.4 million people/ about 64 percent of the total 118 million
workers in Indonesia, with junior high school or lower education.
2. Availability and quality of infrastructure is still lacking thus affecting the
smooth flow of goods and services. According to the Global
Competitiveness Index (GCI) in 2014, the quality of Indonesias
infrastructure is still lagging compared to Singapore, Malaysia, and
Thailand.
3. The industrial sector is fragile due to its dependence on imported raw
materials and semi-finished products.
4. Limited supply of energy to be supplied to industry. *This is a common
issue in Indonesia in the form of targeted blackouts
5. Import surges have weakened Indonesia with an influx of Chinese
products. If the barriers are not addressed in the AEC, there is a fear these
types of problems would be a threat to Indonesia.
Indonesia potentially reaps the benefits of foreign investment as well as
increased exports noted as an important driver of growth for the economy.
Meanwhile, the World Bank estimates that the enforcement of AEC will Attract
Foreign Direct Investment (FDI) in the range of 28 to 63 percent. Increased
FDI is important for Indonesia to maintain economic growth especially when
export performance declines. The potential for Indonesia is great as long as
Indonesia is prepared to take advantage of the momentum.
AEC 2015 poses to bring a very significant impact for the development of
Indonesian businesses because it not only creates a free market for trade in
goods and services, but also touches all the joints of other economies in the
areas of employment, competition, and policies relevant to the development
of Indonesia. AEC should not be viewed as a threat to the Indonesian business
world because of increasing competition from ASEAN countries, but also as a
golden opportunity because the removal of barriers and encouragement of
investment from the ASEAN region.